Sage Et Al v. Central Railroad Company of Iowa Et Al

• Decision Date: 01 October 1876
• Citation: 93 U.S. 412,23 L.Ed. 933
• Parties: SAGE ET AL. v. CENTRAL RAILROAD COMPANY OF IOWA ET AL
• Court: U.S. Supreme Court

93 U.S. 412

23 L.Ed. 933

SAGE ET AL. v. CENTRAL RAILROAD COMPANY OF IOWA ET AL.

October Term, 1876

MOTION, 1. To vacate a supersedeas; 2. Dismiss the appeal.

Mr. R. L. Ashhurst in support of the motions.

Mr. N. A. Cowdrey, contra.

MR. CHIEF JUSTICE WAITE delivered the opinion of the court.

The Farmers' Loan and Trust Company, trustee for the bondholders secured by a mortgage of the Central Railroad Company of Iowa, whose claims amounted in the aggregate to $3,700,000, exclusive of interest, commenced a suit in the Circuit Court of the United States for the District of Iowa, Oct. 14, 1874, to foreclose the mortgage for the benefit of all parties interested in the security.

This was done at the request of a large number of the bond-holders, and after much consultation between them in regard to their common interests. After the cause had been pending for nearly a year, and at some time between Oct. 1 and Oct. 22, 1875, Russell Sage, F. Leake, James Buell, and Edwin Parsons, presented a communication to the trustee, a copy of which is as follows:——

'To the Farmers' Loan and Trust Company, Trustee, &c., First Mortgage Bondholders.

'GENTLEMEN,—We are informed by your counsel, Grant and Smith, that they will ask the court, in the foreclosure suit now pending, to enter such decree as the majority of the bondholders desire. Believing that some of the bondholders have other interests to serve than to protect the first mortgage bondholders, and that large numbers of the bondholders, from want of proper information, have been induced to sign various reguests to the court for certain forms of decree injurious to us as bondholders, and being your cestui que trust to the amount set opposite our names of the first mortgage bonds, to secure the payment of which you hold the mortgage as trustee for ourselves and others similarly situated, this is to notify you of such interest on our part, and to request you to instruct your counsel to procure the ordinary decree of foreclosure and sale; and, failing to get this from the court, to take an appeal to the Supreme Court of the United States.

'If, for any reason, you decline to give your counsel such instructions, please inform us, that we may become a party to said proceedings, and take such course as we may be advised in the matter. We understood the trust-deed to require you to procure the ordinary decree of foreclosure and sale. If the bondholders, or a majority of them, request you to purchase the mortgaged premises, and to form a new company, that it is competent for you to do so, upon such terms and conditions as a majority of the bondholders desire but, until you do so purchase, you are to do all you reasonably can be expected to do to protect the minority as well as the majority of your cestui que trust.

'Respectfully, your obedient servants,

'RUSSELL SAGE, $100,000.

'F. LEAKE, by Russell Sage, $25,000.

'JAMES BUELL, $10,000.

'EDWIN PARSONS, $13,500.

'NEW YORK, Oct. 1, 1875.'

A term of the court commenced Oct. 11, 1875; and on the 22d of that month, the Farmers' Loan and Trust Company, the Central Railroad Company of Iowa, and all the other defendants, together with committees of various bondholders, represented by their respective attorneys, appeared in court and agreed to the form of a decree to be entered in the cause, the same having been the result of consultation and compromise among the parties in interest. At the same time the Farmers' Loan and Trust Company exhibited to the court the communication it had received from Sage and his associates, accompanied by a statement that Buell had deposited with it as trustee $10,000 of bonds secured by the mortgage, Leake, $25,000, and Sage, $100,000, and that it was ready to execute any decree which might be made by the court under the circumstances. The court thereupon, without considering the rights and interests of the various parties, entered, Oct. 22, 1875, the decree agreed upon, and then adjourned until some time in January, 1876.

Down to this time neither Sage nor any of his associates had asked to be made parties to the suit, or to be permitted to intervene in any manner for the protection of their interests, but, Dec. 16, 1875, Sage, Buell, and N. A. Cowdrey presented to the circuit judge, at St. Paul, Minn., the Iowa Circuit Court not being then in session, a petition, as follows:——

'Now comes the Farmers' Loan and Trust Company, as trustee in said cause for Russell Sage, James Buell, and N. A. Cowdrey, and plaintiff in said cause, and prays of the court that an appeal may be allowed to said plaintiff, and tenders to the court an appealbond, with a request that the same may operate as a supersedeas.' Signed, Farmers' Loan and Trust Company, by Grant and Smith, solicitors.

Upon this petition, the circuit judge entered his order, as follows:——

'In this case, an appeal is asked by the complainant so far, and only so far, as it affects the interests of Russell Sage, James Buell, and N. A. Cowdrey.

'I deny the appeal prayed for, because,——

'1. The decree in question was entered by consent of all the parties in interest.

('The term at which this decree was rendered has not yet ended, but stands adjourned until in January next; and the proper course for the parties in whose behalf an appeal is sought is for them to appear, and, if the decree is erroneously entered, or is improper, to apply to be made parties, or to have the decree corrected, or a new decree entered.)

'2. An appeal cannot be taken on behalf of certain bondholders, not parties to the record, leaving the rest of the decree unappealed from. As the trustees (complainants) do not ask for an appeal from the whole decree, I need not consider when they would be justified in a case where there are several millions of dollars of bondholders who acquiesce in the decree, to appeal at the instance of three bondholders who only claim to hold bonds to the extent of $200,000.

'3. If an appeal could be allowed, as asked for, the bond offered is insufficient, as to amount, to secure costs, damages for delay, and costs and interest on the appeal. The clerk will enter the above order of record, denying the appeal prayed for.

'(Signed) JOHN F. DILLON, Circuit Judge.

'AT CHAMBERS, ST. PAUL, Dec. 16, 1875.'

The court met pursuant to adjournment, and Jan. 11, Sage, Buell, and Cowdrey, claiming to be the owners of $200,000 of the bonds secured by the mortgage, filed their petition for leave to intervene in the suit as plaintiffs or defendants, to the end that they might have opportunity to protect the interests they had in common with the other holders of bonds, and with liberty to appeal to this court. Jan. 13, they filed a motion to set aside the decree of Oct. 22.

On the next day, Jan. 14, the cause came on for hearing upon the motion filed Jan. 13, the petition filed Jan. 11, and the petition presented to the circuit judge Dec. 16, with his order thereon. The motion to set aside the decree was denied, and as to the other petition the following order was made: —

'Upon consideration of the premises, it is now by the court ordered, that Sage, Buell, and Cowdrey be, and they are hereby, permitted to become so far parties to the suit as to prosecute, if they so elect, for the protection of their said several interests therein, and in their own names, an appeal to the Supreme Court from the decree entered herein on the twenty-second day of October, 1875; and, if said Sage, Buell, and Cowdrey desire said appeal to operate as a supersedeas, the bond for that purpose is fixed at the sum of $1,000,000, to be given in thirty days from this date; and, if so given, said appeal shall be regarded as taken and perfected on the sixteenth day of December, 1875, the said parties having then applied as aforesaid for said appeal, and having delayed the same until this time by order of the judge at chambers, as above shown; but if said appeal is not to operate as a supersedeas, the bond is fixed at the sum of $2,000.'

No bond was executed under the authority of this order, and, Feb. 16, 1876, a petition for the allowance of an appeal from the orders and decrees of Oct. 22 and Jan. 14, to operate as a supersedeas, was presented to Mr. Justice Miller, the justice of this court assigned to the eighth circuit, in which the district of Iowa is situated; and he allowed the appeal as prayed for, and accepted a supersedeas bond in the sum...